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India needs to roughly triple its data centre capacity just to match China — and the capital, estimated at USD 20–25 billion over the next decade, has to land somewhere. Behind every gigawatt of compute is land, power, and connectivity, making this deficit one of the most consequential infrastructure stories in Indian real estate today.
Few sectors in India are growing as rapidly or consequentially as data centres. According to multiple market reports, India's installed data centre capacity crossed 1.5 GW in 2025, and is projected to grow to 1.8 GW by 2027 and 4 GW by 2030, at a CAGR of roughly 23%. The industry has attracted investments worth USD 14.7 billion since 2020, with several experts projecting a further infusion of USD 20 to 25 billion over the next decade. Advertisement
If you are wondering what data centres do and why they have suddenly grown in prominence, let me help break it down for you. Every time you make a payment via UPI, order groceries via a quick delivery app, stream a show on OTT, or ask an AI chatbot a question, your action is processed inside a data centre.
What are data centres?
A data centre is a dedicated physical facility that houses the computing infrastructure required to store, process, manage, and distribute data at scale: the physical backbone underpinning almost every digital service we use today, from banking and e-commerce to AI, cloud, and communications.
Why does India need data centres?
According to data released by the central government, India crossed the 1 billion internet subscriber mark in the April–June quarter of 2025, with 1,002.85 million subscribers reported by TRAI. In terms of active users, the IAMAI–Kantar Internet in India Report 2024 recorded 886 million active internet users in 2024, with rural India, at 488 million users, accounting for 55% of the total internet population. India now has the second-largest internet user base in the world. India's internet user base is not only large but still expanding, with rural penetration in particular continuing to climb. The scale of this user base directly translates into data generation, storage, and processing demand that domestic infrastructure is currently not equipped to meet.
How much of India's data needs are being met domestically?
India accounts for nearly 20% of global data generation but holds only about 3% of the world's data centre capacity, a structural mismatch that highlights the scale of the domestic deficit. According to MeitY (2024), approximately 70% of Indian organisations currently host critical workloads on foreign clouds, primarily in data centres in Singapore, the US, and Europe.
How much data centre capacity does India need vs. what it has?
According to CareEdge Ratings, India's data centre capacity per million internet users stands at just 1.2 MW, far below the global average of 5 MW per million users. For further context on how severe this gap is, the data centre capacity per million internet users in China is 4 MW, in the EU it is 12 MW, and in the US it is 51 MW.
To close the gap with China, the most comparable large emerging economy, India would need to roughly triple its current capacity relative to its user base. Even if we achieve the projected growth of 4 GW by 2030, given the current momentum of user growth, India is likely to remain well below global benchmarks unless supply significantly accelerates.
This gap is precisely what is driving both the current policy push around data localisation and the flood of hyperscale investment into Indian data centre infrastructure.
Why does India need more data centres?
India's data centre capacity today is not keeping pace with either the scale of its internet economy or the volume of data being generated domestically. India's average monthly wireless data consumption has already crossed 25 GB per user. This figure is expected to grow steeply as 5G, AI-powered applications, OTT platforms, UPI-scale fintech, and e-commerce deepen their penetration across both urban and rural India.
Regulatory imperatives such as the Digital Personal Data Protection Act of 2023 and sector-specific mandates from RBI and SEBI are compelling Indian organisations to repatriate their data domestically. Lastly, there is the wave of AI and AI-enabled tools that consume five to six times the power of a conventional server rack per unit of compute, driving a steep change in the density and scale of infrastructure required.
Simply put, India needs more data centres because it has too many users, too much data, too little domestic infrastructure, and a legal framework that is rapidly closing the door on offshoring the problem.
5th Jun, 2025
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